TY - JOUR
T1 - Consumption and credit
T2 - A model of time-varying liquidity constraints
AU - Ludvigson, Sydney
N1 - Copyright:
Copyright 2017 Elsevier B.V., All rights reserved.
PY - 1999/8
Y1 - 1999/8
N2 - This paper studies the optimal consumption behavior of individuals who face borrowing limitations that vary stochastically with their income. This framework is motivated by new empirical evidence that I document in U.S. aggregate data: predictable growth in consumer credit is significantly related to consumption growth, a finding that is inconsistent with existing models of consumer behavior. The time-varying liquidity constraint model considered here correctly predicts two key properties of the U.S. aggregate data: the correlation of consumption growth with predictable credit growth documented in this paper, and the well-known correlation between consumption growth and predictable income growth that has been documented extensively elsewhere.
AB - This paper studies the optimal consumption behavior of individuals who face borrowing limitations that vary stochastically with their income. This framework is motivated by new empirical evidence that I document in U.S. aggregate data: predictable growth in consumer credit is significantly related to consumption growth, a finding that is inconsistent with existing models of consumer behavior. The time-varying liquidity constraint model considered here correctly predicts two key properties of the U.S. aggregate data: the correlation of consumption growth with predictable credit growth documented in this paper, and the well-known correlation between consumption growth and predictable income growth that has been documented extensively elsewhere.
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U2 - 10.1162/003465399558364
DO - 10.1162/003465399558364
M3 - Article
AN - SCOPUS:0033422227
SN - 0034-6535
VL - 81
SP - 434
EP - 447
JO - Review of Economics and Statistics
JF - Review of Economics and Statistics
IS - 3
ER -